In a bullish assessment, Moody’s Ratings forecasts India’s banking system entering its strongest phase ever by 2026. This optimism stems from sizzling economic growth, pristine asset qualities, and hefty capital buffers that equip lenders to weather storms ahead. Maintaining a ‘stable’ outlook, the agency anticipates a favorable business climate for the coming 12-18 months, underpinned by steady policies and vibrant domestic consumption.
The crown jewel? India’s FY2027 real GDP growth of 6.4%, leading the G20 pack. This momentum will fuel credit expansion and robust balance sheet growth, laying a solid foundation for banking prosperity.
Expect credit growth to rev up to 11-13% in FY2027 from 10.6% prior, propelled by rising household spends and pro-growth government measures. While select mid-sized export sectors could stutter, banks’ forward-looking provisions offer a safety net.
NPL ratios should stabilize at 2-2.5%, with retail segments holding firm thanks to reliable customers. Corporates, buoyed by strong balance sheets and profits, will keep their loans in top shape.
Banks’ profitability edges higher as deposit costs trend down against steady loan yields. RBI’s rate reductions in 2025 will juice incomes, paving the way for profit surges in FY2027.
No panic on capital fronts—existing buffers from equity infusions and internal accruals suffice. New global norms kicking in April 2027 might nibble at ratios, but the effect promises to be negligible.
Liquidity remains unshakeable with matched loan-deposit trajectories. Sovereign support for state-owned lenders adds an extra layer of fortification against international shocks, safeguarding India’s financial fortress.